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Tax Planning7 min read

Quarterly Estimated Taxes: What They Are and How to Calculate Them

If you're self-employed and skipping quarterly payments, you could face penalties. Here's everything you need to know about estimated taxes.

When you work for an employer, taxes are withheld from every paycheck. When you're self-employed, that doesn't happen — which means you're responsible for paying taxes throughout the year. That's where quarterly estimated taxes come in.

Who Needs to Pay Estimated Taxes?

You generally need to make quarterly estimated tax payments if you expect to owe at least $1,000 in federal taxes for the year and your withholding won't cover at least 90% of your tax liability (or 100% of last year's tax). This applies to freelancers, sole proprietors, partners, S-Corp shareholders, and landlords.

The Four Due Dates

Estimated taxes are due four times per year: April 15 (for January–March income), June 15 (April–May), September 15 (June–August), and January 15 of the following year (September–December). Missing these deadlines results in underpayment penalties, even if you pay everything by April 15.

How to Calculate Your Payment

The simplest method is the safe harbor rule: pay at least 100% of last year's total tax liability (or 110% if your prior-year AGI exceeded $150,000), divided into four equal payments. This protects you from penalties regardless of how much you earn this year.

The More Accurate Method

If your income is predictable, estimate your current-year net profit, subtract your deductions, apply your tax rate (including self-employment tax), and divide by four. This approach avoids overpaying but requires more careful tracking.

How to Pay

The easiest way to pay federal estimated taxes is through IRS Direct Pay at irs.gov or the EFTPS system. For Oklahoma state estimated taxes, use the Oklahoma Tax Commission's OkTAP portal. Keep records of every payment — you'll need them when filing your return.

What Happens If You Don't Pay?

The IRS charges an underpayment penalty — currently around 8% annualized — on the amount you should have paid. It's not catastrophic, but it's avoidable. More importantly, skipping quarterly payments often leads to a large, stressful tax bill in April.

Getting It Right

Estimated taxes are one of the areas where working with a tax professional pays for itself. McCloud & Associates helps self-employed clients calculate accurate quarterly payments and adjust them as income changes throughout the year.